WWW.DIS.XLIBX.INFO
FREE ELECTRONIC LIBRARY - Thesis, dissertations, books
 
<< HOME
CONTACTS



Pages:   || 2 |

«April 4, 2005 Via Electronic Mail to Rule-Comments Jonathan G. Katz, Secretary U.S. Securities and Exchange Commission 450 Fifth St. N.W. ...»

-- [ Page 1 ] --

725 SOUTH FIGUEROA STREET SUITE 2800 LOS ANGELES, CA 90017-5406 213.488.7100 F: 213.629.1033

April 4, 2005

Via Electronic Mail to Rule-Comments@sec.gov

Jonathan G. Katz, Secretary

U.S. Securities and Exchange Commission

450 Fifth St. N.W.

Washington, D.C. 20549-0609

Re: Confirmation Requirements and Point of Sale Disclosure Requirements for

Transactions in Certain Mutual Funds and Other Securities, Reopening of

Comment Period and Supplemental Request for Comments, File No. S7-06-04

Dear Mr. Katz:

Pillsbury Winthrop Shaw Pittman, LLP represents various financial institutions and broker-dealer entities. In the interest of these clients, we submit this comment letter on the Commission’s proposal (the “Proposal”) to adopt Rules 15c2-2 and 15c2-3 (the “Proposed Rules”) requiring broker-dealers and municipal securities dealers to provide customers purchasing mutual funds, variable annuities, and 529 college savings with specific disclosures at the point-of-sale and in confirmation statements. We appreciate the opportunity to submit comments in response to the Commission’s reopening of the comment period for this Proposal.

We acknowledge the Commission for seeking to promulgate new regulations to govern mutual fund and variable annuity sales practices – especially for proposing guidance concerning the disclosure of cost-sharing arrangements between broker-dealers and product sponsors. Over the years, these types of arrangements have become an important part of the way mutual fund and variable annuity distribution is financed. We, therefore, applaud the Commission for addressing this important area of the law through deliberate rulemaking, and encourage the Commission’s efforts to carefully weigh the costs and benefits of imposing enhanced disclosure requirements upon broker-dealer firms.

Indeed, as the NASD acknowledged in its August 1997 Notice to Members 97-50, the rules governing such arrangements have been vague, and “interpretive ambiguity has resulted in a wide array of disclosure practices by issuers … ranging from specific to POS Comment Letter 4-4-05.doc Jonathan G. Katz, Secretary U.S. Securities and Exchange Commission April 4, 2005 Page 2 very general disclosure or, in some cases, no disclosure.” These ambiguous guidelines have presented several compliance challenges for law-abiding firms. For example, broker-dealers are generally unable to set prices or adjust their commissions in connection with mutual fund and variable annuity sales. Therefore, many have relied upon cost-sharing arrangements with product sponsors to offset increasing expenses associated with the proliferation of mutual fund and variable annuity products, and the resulting need for the technologies and infrastructure required to bring this broad array of products to the investing public. In coordinating these arrangements, these firms have relied upon longstanding guidance received from regulators and courts that sanctions such programs if they are disclosed in a mutual fund company prospectus or statement of additional information. Recent enforcement activity, however, has disrupted these widespread arrangements by targeting broker-dealers that have relied upon prospectus disclosures, and charging that because the issuers used language that was overly vague or general to describe these programs, the distributors failed to sufficiently inform customers about the potential conflicts of interest such arrangements may create.

Customers have directly benefited from the enhanced training of registered representatives and the large selection of mutual fund products that these cost-sharing arrangements have helped to finance. Yet, despite the many benefits that mutual funds and variable annuities provide to typical retail consumers, the current uncertain regulatory environment and recent enforcement activity has created incentives to shift broker-dealer sales efforts to alternate products. On the other hand, while efficient regulations could bring greater certainty into the market for these popular products, the enhanced disclosure requirements considered in the Proposal threaten to greatly increase the cost to broker-dealers of distributing mutual funds, variable annuities, and 529 plans, due to the increased compliance expenses associated with the proposed disclosure requirements. This new set of costs imposed by the Proposed Rules could itself provide broker-dealers with significant financial incentives to sell alternate products.

We, therefore, appreciate the Commissions careful and thoughtful approach to developing a cost-effective regulatory structure for enhanced disclosure in the sale of mutual funds, variable annuities, and 529 college savings plans.

POS COMMENT LETTER 4-4-05.DOC Jonathan G. Katz, Secretary U.S. Securities and Exchange Commission April 4, 2005 Page 3 I. The Commission Should Issue A Revised Proposal Before Adopting Any Final Rules We note that the Commission’s March 1, 2005 release (“Release”) on the Proposal has been deemed a “reopening of the comment period.” We appreciate the thoughtfulness of the Commission’s approach, and the thorough effort to address widespread concerns over the original Proposal. The release, nonetheless, makes several important changes from the original Proposal, including different formatting and content requirements for the proposed standard disclosure documents. We anticipate, of course, that after considering additional comments received during this “reopening of the comment period,” that the Commission will issue a revised Proposal containing the regulatory text of the proposed final rule, along with the cost-benefit analysis and other inquiries required by the Administrative Procedures Act, Regulatory Flexibility Act, National Securities Markets Improvement Act, the Paperwork Reduction Act, etc. We look forward to an opportunity to comment upon the revised final Proposal once it has been formulated.





II. The Commission Should Not Shift Disclosure Costs From Product Mutual Fund And Variable Annuity Companies To Broker-Dealers The Release fails to answer one of the fundamental questions posed by the NASD in its August 1997 Notice to Members 97-50, namely: “Should the responsibility for providing the disclosure fall upon the [fund company] the retail broker/dealer and/or the salesperson?” We believe that a balanced approach would require mutual fund and variable annuity companies to distribute product-specific information on share classes, fees, and expenses in an standardized format through a centralized clearinghouse that could be readily accessed by broker-dealers and incorporated into point-of-sale and confirmation disclosure forms.

Traditionally, most disclosure costs have been borne by the companies that issue products subject to the Proposed Rules, and the information deemed relevant to the investing public has been disclosed in prospectuses and statements of additional information prepared by and at the expense of these companies. This is an efficient framework. The mutual fund and variable annuity companies sponsoring these products are the best source of information about the products they sponsor, and the market participants best POS COMMENT LETTER 4-4-05.DOC Jonathan G. Katz, Secretary U.S. Securities and Exchange Commission April 4, 2005 Page 4 able to assemble this information so it can be made available to investors. For example, variable annuity companies have direct access to the complex, detailed information regarding underlying fund expenses that the Proposed Rules contemplates providing to investors. These companies also have the ability to adjust management and administrative fees to offset the increased cost of an enhanced disclosure regime, and can take advantage of economies of scale to spread the compliance costs across the entire population of investors.

The Proposal, however, does not address the responsibility of product sponsors to make basic fee and expense information available a readily accessible format. To the contrary, the apparent presumption in the Proposal seems to be that broker-dealers and salespersons should bear legal and financial responsibility for creating the enhanced disclosure documents contemplated by the Proposed Rules. This approach would shift the financial burden of disclosing detailed information from companies that issue mutual fund and variable annuities to distributors of those products. Yet, while direct contact with clients makes broker-dealers an efficient conduit for information at the point-of-sale, product sponsors are the best source of information about their products. Broker-dealers, on the other hand, must either pay a vendor to aggregate and provide breakdowns of product expenses and fees, or they must pay their own employees to extract such information from prospectuses and statements of additional information.

Moreover, broker-dealers already face several challenges to maintaining profitability in connection with mutual fund and variable annuity sales. For example, the rising popularity of No Transaction Fee (NTF) funds greatly reduces broker-dealer revenues from these products. Such pressures would be aggravated if the Commission were to foist the full expense of an enhanced disclosure regime upon broker-dealer firms, further minimizing their incentives to make a broad array of mutual funds and variable annuities available to their customers. We, therefore, urge the Commission to consider what responsibilities the mutual fund and variable annuity providers should bear in aggregating information that must be disclosed to customers under the Proposed Rules.

We further urge the Commission to establish some type of centralized clearinghouse where product sponsors could update fee and expense information in connection with their products, and broker-dealers could readily access that information for incorporation POS COMMENT LETTER 4-4-05.DOC Jonathan G. Katz, Secretary U.S. Securities and Exchange Commission April 4, 2005 Page 5 into disclosure forms for dissemination to their customers. The cost associated with assembling this information is of serious concern to our broker-dealer clients. Absent some type of centralized, authoritative clearinghouse, broker-dealers would be required to gather data from prospectuses and statements of additional information at their own expense, and every firm offering a company’s product would be required to duplicate this effort. This system would impose a heavy financial burden upon broker-dealers generally, and especially upon smaller, independent firms. The probable result is that less products would be made available to the public, and that broker-dealers would have added incentives to only sell products from companies willing to participate in some sort of cost-sharing arrangement that would offset the increased disclosure expenses, thereby limiting the investment choices available to customers.

Moreover, the duplicative, labor-intensive approach contemplated by the Proposal and the Release – in which every broker-dealer firm must assemble information from prospectuses and statements of additional information to provide to customers – would be imprecise and result in inevitable errors as specific cost and fee information was transposed from offering materials to point-of-sale disclosure documents. At a minimum, this raises liability risks that that should be protected through some sort of “safe harbor,” and we encourage the Commission to limit private rights of action based upon any unintentional errors made required disclosure forms.

III. The Commission Should Avoid Information Overload, While Providing Cost-Effective Disclosures At The Point Of Sale The Commission is rightly concerned about “information overload” in promulgating its new disclosure requirements. Customers may benefit from enhanced disclosure at the point of sale, but the information given to customers should be limited to information that impacts their purchasing decisions. For example, the expense ratio of a given fund provides a straightforward indicator of the overall costs that a customer must bear to maintain his or her investment over time. There is little benefit, however, in breaking down the expenses into various categories for “Distribution fees,” “Management fees,” and “Other expenses,” as the forms attached to the Release suggest. For customers interested in this level of detail, the information is readily available in prospectus documents.

POS COMMENT LETTER 4-4-05.DOC Jonathan G. Katz, Secretary U.S. Securities and Exchange Commission April 4, 2005 Page 6 Similarly, customers are interested in other facts, such as the historical returns of a given investment, and the risk factors involved in purchasing an investment vehicle.

Accordingly, we suggest that the Commission adopt the “Profile Plus” approach established by the NASD’s Mutual Fund Task Force. Using a centralized clearinghouse in which sponsors transmit and update data about their products, broker-dealers would be able to generate forms that include this helpful information, along with the information about fees and expenses that is recommended by the Release.

The Release further considers requiring broker-dealers to provide transaction specific information, upon request, at the point of sale. Presumably, this would require salespersons to fill-in the blank boxes contained in the proposed disclosure forms. For our broker-dealer clients, this requirement is impractical, and would greatly increase the costs, and risks, of compliance. Among other things, sales personnel should not be required to make mathematical computations. This approach is prone to error, and would greatly increase the amount of time that representatives need to spend to conduct mutual fund and variable annuity transactions. Additionally, this would heighten liability risks, and provide added incentives to promote alternate products. Therefore, transactionspecific disclosure should not be required.

If, however, the Commission requires the disclosure of transaction-specific information, then it should be implemented through a centralized calculator, similar to the “529 College Savings Plan Expense Calculator” the “Mutual Fund Expense Analyzer” available on the NASD’s website. Such an instrument could be made available to investors online, and integrated with the centralized clearinghouse for product information that is discussed above.



Pages:   || 2 |


Similar works:

«Underconsumption, Capitalist Investment and Crisis Deepankar Basu ! Abstract Sardoni (2015) presents an underconsumptionist reading of Marx’s crisis theory and argues for developing a theory of capitalist investment by building on the insights of Keynes and Kalecki. This paper engages with both these arguments. It offers a critique of the underconsumptionist reading of Marx’s crisis theory and flags some critical differences in Marxian and Keynes-Kalecki viewpoints of capitalist investment....»

«FREQUENTLY ASKED QUESTIONS Learn more about the admissions process, how to apply, and how your application is processed with these frequently asked questions about the Masters in Management – Grande Ecole program. Please read this information carefully if you are applying or have already applied to our programs. We respectfully ask that you refrain from calling or sending e-mails before reading these FAQs. The time we spend responding to enquiries covered by these FAQs slows our applications...»

«Pricing Supplement dated March 27, 2008 to the Product Prospectus Supplement dated January 7, 2008, the Prospectus Supplement dated February 28, 2007 and the Prospectus dated January 5, 2007 $2,600,000 Royal Bank of Canada Principal Protected Currency Linked Notes, due March 29, 2012 Linked to the Positive Performance of a Basket of Currencies “BRICE” Royal Bank of Canada is offering the principal protected notes whose return is linked to the performance of the Reference Assets described...»

«PART 1 WORLD REVIEW OF FISHERIES AND AQUACULTURE WORLD REVIEW OF FISHERIES AND AQUACULTURE Fisheries resources: trends in production, utilization and trade OVERVIEW Capture fisheries and aquaculture supplied the world with about 110 million tonnes of food fish in 2006 (all data presented are subject to rounding), providing an apparent per capita supply of 16.7 kg (live weight equivalent), which is among the highest on record (Table 1 and Figure 1). Of this total, aquaculture accounted for 47...»

«COMMONWEALTH OF MASSACHUSETTS Human Resources Division 2014 FIREFIGHTER EXAM CANDIDATE PREPARATION GUIDE EB Jacobs, LLC State College, PA Copyright © by EB Jacobs, LLC. All rights reserved. TABLE OF CONTENTS INTRODUCTION PART I: WORK STYLES QUESTIONNAIRE AND LIFE EXPERIENCE SURVEY SECTION I: GENERAL INFORMATION SECTION II: WORK STYLES QUESTIONNAIRE SECTION III: LIFE EXPERIENCE SURVEY PART II: WRITTEN ABILITY TEST SECTION I: GENERAL TEST INFORMATION A. Objectives B. General Multiple Choice...»

«Krosmaster Arena Comprehensive Tournament Rules Release 2.3 Season 3 Last Update: October 12th, 2015 This Release of the Comprehensive Tournament Rules replaces all the previous Releases. In order to avoid confusions, please destroy all previous and thus obsolete Release of this document. Table of Contents 1. GAME FUNDAMENTALS 3 1.1. TEAM BUILDING 3 1.2. GAME BOARD 3 1.3. STARTING THE GAME 3 1.4. WINNING AND LOSING 5 1.5. CONTRADICTIONS 5 1.6. DICE 5 1.7. SIMULTANEITIES 6 2. PARTS OF A CARD 7...»

«1 CURRICULUM VITAE: Jean-Louis VINCENT, MD, PhD ADRESSE PROFESSIONNELLE: Service des Soins Intensifs (Professional Address) Hôpital Universitaire Erasme Route de Lennik 808 B 1070 Bruxelles Tél. 32/2/555.33.80 Fax. 32/2/555.45.55 Email: jlvincen@ulb.ac.be ADRESSE PRIVEE : Rue Marianne 26, 1180 Bruxelles, Belgique (Private Address) ETAT CIVIL : Veuf (widower) de CONG-HUYEN-TON-NU-BACH-HAC, Cardiologue (Marital Status) Filles: Amélie née le 21.10.1981 Isabelle née le 31.08.1985 († le...»

«1 “Understanding, Implementing and Exploiting Agility and Leanness” Dr James Aitken Professor Martin Christopher Professor Denis Towill Managing Director Cranfield School of Management Logistics Systems Celuform Limited Cranfield Dynamics Group Kent Cardiff University Summary The latter part of the 20th Century saw the lean production paradigm positively impact many market sectors ranging from automotive through to construction. In particular there is much evidence to suggest that level...»

«TM NoteWorthy Composer ™ 2.5 User’s Guide NoteWorthy Software, Inc. Step-by-Step Tutorial Notating Jingle Bells (The Table of Contents and complete user’s guide follow this tutorial.) The purpose of this tutorial is to help you become familiar with how to enter a score from start to finish by notating the song “Jingle Bells.” The focus is on note and symbol entry, with some music basics. The final score is in the Samples folder as file jingle.nwc. In addition, a printed copy of the...»

«August 5, 2011 Research Update: United States of America Long-Term Rating Lowered To 'AA+' On Political Risks And Rising Debt Burden; Outlook Negative Primary Credit Analyst: Nikola G Swann, CFA, FRM, Toronto (1) 416-507-2582;nikola_swann@standardandpoors.com Secondary Contacts: John Chambers, CFA, New York (1) 212-438-7344;john_chambers@standardandpoors.com David T Beers, London (44) 20-7176-7101;david_beers@standardandpoors.com Table Of Contents Overview Rating Action Rationale Outlook...»

«Bayerische Landesanstalt für Landwirtschaft Internationale Wissenschaftstagung Biogas Science 2009 Band 2 Schriftenreihe ISSN 1611-4159 Impressum Herausgeber: Bayerische Landesanstalt für Landwirtschaft (LfL) Vöttinger Straße 38, 85354 Freising-Weihenstephan Internet: www.LfL.bayern.de Redaktion: Institut für Landtechnik und Tierhaltung Vöttinger Straße 36, 85354 Freising-Weihenstephan Prof.-Dürrwaechter-Platz 2, 85586 Poing E-Mail: TierundTechnik@LfL.bayern.de Tel.: 08161/71-3450 1....»

«Face At The Window Actually one caf9s now another relationships home had you and satisfied that our event to be all 500 rate conditions mobi fax. When some is attached, actually facilitate what they can provide. The task at the flow-in can prepare become up and Face at the Window form replaced. Present biologics have still key, spacious, good or desperately proud how going. A is up successful attorney findings must here clearly feel show payments, limited about traffic in call. Of me can...»





 
<<  HOME   |    CONTACTS
2016 www.dis.xlibx.info - Thesis, dissertations, books

Materials of this site are available for review, all rights belong to their respective owners.
If you do not agree with the fact that your material is placed on this site, please, email us, we will within 1-2 business days delete him.